Why It MattersIf you go to the doctor for a checkup, she willtake your vital signs—your temperature, yourblood pressure, and your pulse rate. When itcomes to the economy, economists do much thesame. This chapter discusses many of the measure-ments that economists make to determine the healthof the economy.First, economists want to measure the total outputof the economy. They want to measure the total mar-ket value of all the goodsand services produced annu-ally in the United States.Think of it in this way: eachyear, people in the UnitedStates produce goods andservices—cars, houses, com-puters, attorney services, andso on. Economists want toknow the total dollar value ofall these goods and services. Another vital sign thateconomists want to monitoris prices. Are prices in the economy rising? If so, howfast are they rising? Are they rising by 1 percent, 3 per-cent, or 5 percent? Are prices falling? If so, how fastare they falling?As you read this chapter, think of the economy as apatient in a doctor’s office. Instead of the doctor check-ing out the economy, an economist will take the econ-omy’s “pulse,” “height and weight,” and other vital signs.In later chapters you will learn more about the remedieseconomists prescribe for an unhealthy economy.286This relatively small trans-action is but one of mil-lions that economistsaccount for each year tomeasure the economy’sactivity.

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The following events occurred one dayin June.1:13 P.M.Jones, the plumber, is just finishing up the jobat Kevin’s apartment. Kevin asks Jones how much he owes him.Jones says, “$210.” “Okay,” says Kevin as he takes out his check-book. “Oh, and by the way,” Jones adds, “could you pay mein cash?”• Why does Jones want to be paid in cash?1:34 P.M.The economics professor is telling her classthat China has one of the highest gross domestic products ofany country in the world. A student remarks, “But I thoughtChina was a poor country. How can a poor country have ahigh gross domestic product?”• How can a country have a high GDP and bepoor too?2:34 P.M.Beverlee Smith picks up the phone tocall her parents, both of whom are retired. When herfather answers the phone, Beverlee blurts out, “I gotthe job. And I got the salary I asked for—$60,000.” Herfather replies, “That’s a great salary—you’re rich. Afterall, your mother and I lived comfortably on my firstsalary of $8,000.”• What mistake is Beverlee’s father making incomparing his first salary (years ago) with hersalary today?8:00 P.M.Jimmy and Ellie are in theirseats in the dark movie theater as the trailers play.They’re waiting for the start of the movie. Ads forthe movie have been running on television forweeks. Jimmy turns to Ellie and whispers, “I heardthat this movie might be the biggest box office hit ofall time—even bigger than Titanic.”• What’s the best way to compare the grossreceipts of two movies?

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